September 28, 2011

Minnesota to cooperate with Feds in contractor misclassification enforcement

Posted in Fair Labor Standards Act, Independent Contractors, Independent Contractors tagged , , , , , at 9:05 am by Tom Jacobson

In memorandum of understanding (MOU) between the Minnesota Department of Labor and Industry (DOLI) and the United States Department of Labor (DOL), the State of Minnesota agreed on September 19, 2011 to coordinate with DOL and the IRS in their efforts to end the problem of employers misclassifying employees as independent contractors (see Labor secretary, IRS commissioner sign memorandum of understanding to improve agencies’ coordination on employee misclassification compliance and education).

The problem is that when an employee is improperly classified as an independent contractor, the consequences are wide-ranging.  For example, unpaid overtime, taxes, eligibility for unemployment benefits, protection under various equal employment opportunity laws, eligibility for leaves of absence, personnel record retention, etc., all come into play.  Because of these intertwined laws (which are all enforced by different state and federal agencies), the DOL spearheaded this attempt to coordinate efforts.  Regarding the MOU, DOL Secretary Hilda Solis said,”We’re here today to sign a series of agreements that together send a coordinated message: We’re standing united to end the practice of misclassifying employees…. We are taking important steps toward making sure that the American dream is still available for all employees and responsible employers alike.”

Other participants in this coordinated effort are DOL’s Employee Benefits Security Administration, Occupational Safety and Health Administration, Office of Federal Contract Compliance Programs and Office of the Solicitor.  The states of Connecticut, Maryland, Massachusetts, Missouri, Utah and Washington also signed the MOU.  It appears that Hawaii, Illinois, Montana and New York will follow suit.

It’s too early to tell whether this means Minnesota’s DOLI will become more aggressive in enforcing misclassification cases.   However, the MOU certainly confirms that if DOLI finds employees who were improperly classified as independent contractors, the news will likely spread to numerous other agencies, thus compounding the consequences for any violators.  To reduce the risk of liability, employers should carefully examine any existing or proposed independent contractor relationships to determine whether true independence exists under the law.

For more information about this article, please contact me at taj@alexandriamnlaw.com.

The comments posted in this blog are for general informational purposes only. They are not to be considered as legal advice, and they do not establish an attorney-client relationship. For legal advice regarding your specific situation, please consult your attorney.

Copyright 2011 Swenson Lervick Syverson Trosvig Jacobson Schultz, PA

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